Higby Crane Service, LLC et al v. National Helium, LLC et al

Filing 54

MEMORANDUM AND ORDER denying 39 Defendants' Motion for Summary Judgment; granting 42 Plaintiffs' Cross Motion for Summary Judgment. Signed by District Judge Julie A. Robinson on 11/29/2012. (pp)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

HIGBY CRANE SERVICE, LLC, et al.,

)
)
Plaintiffs,
)
)
vs.
)
)
NATIONAL HELIUM, LLC.,
)
)
)
Defendants.
)
____________________________________)

Case No. 10-1334-JAR

MEMORANDUM AND ORDER
This litigation arose as a result of a fire in the National Helium Plant near Liberal, Kansas
on August 19-20, 2008, causing damage to one of Plaintiff Higby Crane, LLC’s (“Higby”)
cranes. Plaintiff National Insurance Company (“National”) is an insurance company licensed to
issue general liability insurance policies in Kansas. National brought this action against
Defendants National Helium, LLC. (“National Helium”), which owned the plant, and Duke
Energy Field Service, LP (“Duke Energy”), which operated the facility, claiming a right of
subrogation through its insured, Higby. Plaintiffs seek $253,848.10, the amount of loss from the
crane’s destruction.
On April 4, 2012, Defendants filed a motion for summary judgment (Doc. 39), arguing
primarily that a contract governing the relationship between the parties contains a subrogation
waiver by Higby that prevents National from subrogating this claim. On April 30, Plaintiffs filed
a cross motion for summary judgment (Doc. 42), arguing that the contract does not address the
claim in this case. Both motions are currently before the Court and are fully briefed, and the
Court is prepared to rule. As described more fully below, the Court grants Plaintiffs’ cross

motion for summary judgment and denies Defendants’ motion for summary judgment.
I.

Legal Standards
Summary judgment is appropriate if the moving party demonstrates that there is no

genuine dispute as to any material fact and that it is entitled to judgment as a matter of law.1 In
applying this standard, the court views the evidence and all reasonable inferences therefrom in
the light most favorable to the nonmoving party.2 “There is no genuine issue of material fact
unless the evidence, construed in the light most favorable to the nonmoving party, is such that a
reasonable jury could return a verdict for the nonmoving party.”3 A fact is “material” if, under
the applicable substantive law, it is “essential to the proper disposition of the claim.”4 An issue
of fact is “genuine” if “‘the evidence is such that a reasonable jury could return a verdict for the
non-moving party.’”5
The moving party initially must show the absence of a genuine issue of material fact and
entitlement to judgment as a matter of law.6 In attempting to meet this standard, a movant that
does not bear the ultimate burden of persuasion at trial need not negate the other party’s claim;
rather, the movant need simply point out to the court a lack of evidence for the other party on an

1

Fed. R. Civ. P. 56(a); see also Grynberg v. Total, 538 F.3d 1336, 1346 (10th Cir. 2008).

2

City of Harriman v. Bell, 590 F.3d 1176, 1181 (10th Cir. 2010).

3

Bones v. Honeywell Int’l, Inc., 366 F.3d 869, 875 (10th Cir. 2004).

4

Wright ex rel. Trust Co. of Kan. v. Abbott Labs., Inc., 259 F.3d 1226, 1231–32 (10th Cir. 2001) (citing
Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998)).
5

Thomas v. Metro. Life Ins. Co., 631 F.3d 1153, 1160 (10th Cir. 2011) (quoting Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986)).
6
Spaulding v. United Trasp. Union, 279 F.3d 901, 904 (10th Cir. 2002) (citing Celotex Corp. v. Catrett, 477
U.S. 317, 322–23 (1986)).

2

essential element of that party’s claim.7
Once the movant has met this initial burden, the burden shifts to the nonmoving party to
“set forth specific facts showing that there is a genuine issue for trial.”8 The nonmoving party
may not simply rest upon its pleadings to satisfy its burden.9 Rather, the nonmoving party must
“set forth specific facts that would be admissible in evidence in the event of trial from which a
rational trier of fact could find for the nonmovant.”10 To accomplish this, the facts “must be
identified by reference to an affidavit, a deposition transcript, or a specific exhibit incorporated
therein.”11 Rule 56(c)(4) provides that opposing affidavits must be made on personal knowledge
and shall set forth such facts as would be admissible in evidence.12 The non-moving party
cannot avoid summary judgment by repeating conclusory opinions, allegations unsupported by
specific facts, or speculation.13 “Where, as here, the parties file cross-motions for summary
judgment, [the Court is] entitled to assume that no evidence needs to be considered other than
that filed by the parties, but summary judgment is nevertheless inappropriate if disputes remain

7

Adams v. Am. Guar. & Liab. Ins. Co., 233 F.3d 1242, 1246 (10th Cir. 2000) (citing Adler, 144 F.3d at
671); see also Kannady v. City of Kiowa, 590 F.3d 1161, 1169 (10th Cir. 2010).
8

Anderson, 477 U.S. at 256; Celotex, 477 U.S. at 324; Spaulding, 279 F.3d at 904 (citing Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).
9

Anderson, 477 U.S. at 256; accord Eck v. Parke, Davis & Co., 256 F.3d 1013, 1017 (10th Cir. 2001).

10

Mitchell v. City of Moore, Okla., 218 F.3d 1190, 1197–98 (10th Cir. 2000) (quoting Adler, 144 F.3d at
671); see Kannady, 590 F.3d at 1169.
11

Adams, 233 F.3d at 1246.

12

Fed. R. Civ. P. 56(c)(4).

13

Id.; Argo v. Blue Cross & Blue Shield of Kan., Inc., 452 F.3d 1193, 1199 (10th Cir. 2006) (citation

omitted).

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as to material facts.”14
Finally, summary judgment is not a “disfavored procedural shortcut”; on the contrary, it
is an important procedure “designed to secure the just, speedy and inexpensive determination of
every action.”15 In responding to a motion for summary judgment, “a party cannot rest on
ignorance of facts, on speculation, or on suspicion and may not escape summary judgment in the
mere hope that something will turn up at trial.”16
II.

Uncontroverted Facts
Many of the relevant facts in this case are not controverted for purposes of summary

judgment. At all material times, Defendant Duke Energy, renamed DCP Midstream, LP
(“DCP”),17 has operated, and its wholly owned subsidiary, National Helium, has owned the
National Helium Plant, a gas processing plant near Liberal, Kansas. National Helium is an
affiliate of DCP.
On or about November 1, 2001, DCP and Higby entered into a Master Service
Agreement (“MSA”) that established general terms and conditions which apply to every oral or
written contract between the parties. DCP is identified as “Company” in the MSA and Higby is
identified as “Contractor.”

14

James Barlow Family Ltd. P’ship v. David M Munson, Inc., 132 F.3d 1316, 1319 (10th Cir. 1997)
(citation omitted).
15

Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed. R. Civ. P. 1).

16

Conaway v. Smith, 853 F.2d 789, 794 (10th Cir. 1988).

17

Defendants filed an affidavift attesting that “[a]s of November 1, 2001, DCP, which was then named Duke
Energy Field Services, LP, and Higby Crane entered into the attached Master Service Agreement, Contract No.
MSA-MC01079.” Doc. 16 at 1; see also Doc. 43-1 at 3 (Certificate of Name Change). Plaintiffs have not put this
fact in controversy. For clarity, the remainder of this order will use DCP.

4

MSA ¶ 9.1 required Higby to purchase four kinds of insurance: (1) Worker’s
Compensation Insurance, (2) Employer’s Liability Insurance, (3) Commercial General Liability
Insurance, and (4) Business Automobile Liability Insurance. Under MSA ¶ 9.3, Higby was
required to procure policies for these four types of insurance in which the insurer assigns and
relinquishes to DCP all rights of recovery, lien, and subrogation which an insurer might
otherwise have against DCP. The parties disagree as to whether, under the MSA, Higby was to
require that the insurer waive these rights for any insurance that Higby might acquire, outside of
the four types enumerated in the MSA.
Higby obtained a Commercial Inland Marine policy from National, covering risks of
direct physical loss from an external cause to covered property. There is no duty under MSA ¶
9.3 or elsewhere in the MSA for Higby to procure a Commercial Inland Marine policy, although
Defendants allege that it is included among those policies for which Higby was to require that
the insurer waive recovery, lien, and subrogation rights under the MSA. The CIM policy
includes a subrogation clause that states if in the event of a loss, Higby “shall acquire any right
of action against any individual, firm or corporation for loss of, or damage to, property covered
hereunder, [Higby] will, if requested by [National], assign and transfer such right of action to
[National] to the extent of payment made by [National].”18
On or about August 19 to August 20, 2008, Defendants, in the course of operating the
National Helium Plant, negligently released or vented various gases in such a manner that a
vapor cloud formed and ignited. As a result of the fire, the crane owned by Higby and insured
by National was damaged to the extent it was inoperable and required repair at a cost of
18

See Doc. 40-3 at 6.

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$253,848.10.
III.

Discussion
Based on the uncontroverted facts, these cross motions for summary judgment present the

question of whether Plaintiffs’ claim to recover damages for property loss as a result of the
negligence of Defendants’ employees is barred as a matter of law by the language in the MSA,
as Defendants argue, or whether the MSA has no application to Plaintiffs’ claims as a matter of
law, as Plaintiffs argue. Although this central question turns on the language in the MSA, the
parties raise two other arguments. First, Plaintiffs argue that, if the MSA does indeed bar
National’s subrogation of this claim, Colorado law forbids such an agreement and that portion of
the MSA is void. Second, Defendants argue that, if the CIM policy is not one of the kinds of
policies identified in the MSA, and Higby has not otherwise purchased the required insurance,
Higby has breached the contract and should not be able to recover for its loss.
In this case, the parties agree that Colorado substantive law applies, based on a choice of
law provision in the contract at issue. “Federal courts in Kansas routinely enforce the parties’
contractual choice-of-law provisions under Kansas choice-of-law rules.”19 “Under Kansas law,
the enforceability of a contractual choice-of-law provision turns on whether the forum selected
bears a reasonable relation to the contract at issue.”20 Here, a reasonable relation exists because
both Duke Energy’s and National Helium’s company headquarters are in Colorado.
A. Applicability of the MSA Subrogation Requirements.

19

Altrutech, Inc. v. Hooper Holmes, Inc., 6 F. Supp. 2d 1269, 1273 (D. Kan.1998).

20

Id. (citation omitted)

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The relevant MSA provisions state as follows:
8.5 Third Party and Property Damage Claims and Liabilities. As to
claims and liabilities not specifically provided for in this Agreement,
the Parties shall rely on such rights and remedies as they may have
at law or in equity and on the insurance to be provided under
Paragraph 9 below.
....
9. INSURANCE
9.1 Required Coverages. Throughout the term of this Agreement
Contractor shall carry and pay for the following insurance:
....
(c) Commercial General Liability Insurance covering
liabilities for death and personal injury and liabilities for loss
of or damage to property with combined single limit of not
less than $3,000,000 per occurrence. This insurance must
cover all operations of Contractor required to fulfill this
Agreement.
....
9.2 Additional Assureds. The insurance policies described above
shall include Company, its affiliates and coventurers, and their
directors, officers, and employees as additional assureds. All
insurance required hereunder and provided by Contractor shall be
primary coverage.
9.3 Waiver of Subrogation. The insurance policies described above
shall, in addition be so written or endorsed to provide that the insurer
shall assign and relinquish unto Company (i) any right of recovery
which the insurer may have or acquire against Company, its affiliates
or coventurers, or their directors, officers, or employees for payments
made or to be made under such policies, and (ii) any lien or right of
subrogation which the insurer may have or acquire for payments
made or to be made to any person who asserts a claim against
Company, its affiliates or coventurers or their directors, officers, or
employees. The assignment shall be written and is intended to permit
Company to obtain an offset or credit against any claim filed or
prosecuted against Company, its affiliates or coventurers, or any of
their officers, directors, or employees by any person or entity to or for
whom the insurer pays monies or other benefits. Nothing herein shall
limit or affect Company’s rights and coverage as an additional

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assured under such insurance policies.21
Defendants argue that MSA ¶ 9.1 required Higby to procure insurance that covered
“liabilities for loss of or damage to property” and “all operations of Contractor required to fulfill
this Agreement,” and that the CIM policy met these requirements. Defendants then argue that
the CIM policy was, under MSA ¶ 9.3, one of the “insurance policies described above,” such that
National cannot subrogate Higby’s claim in order to seek payment for National’s payment for
the crane under the CIM policy. This argument fails.
Under Colorado law, the interpretation of a contract is a matter of law.22 Colorado courts
must construe the terms of the agreement in a manner that allows each party to receive the
benefit of the bargain, and the scope of the agreement must faithfully reflect the reasonable
expectations of the parties.23 Colorado courts ascertain the parties’ intent by looking to the plain
language of the agreement and enforce the agreement as written unless there is an ambiguity in
the language; courts should neither rewrite the agreement nor limit its effect by a strained
construction.24 Where, as here, a party argues that the contract acts as an agreement to indemnify
another for the indemnitee’s own negligence, such a construction is only permitted if “it contains
a clear and unequivocal expression that the parties intended that result.”25
For purposes of this suit, the MSA required only Commercial General Liability

21

Doc. 40-1 at 4–5.

22

Allen v. Pacheco, 71 P.3d 375, 378 (Colo. 2003) (internal citations omitted).

23

Id.

24

Id.

25

Constable v. Northglenn, LLC, 248 P.3d 714, 716 (Colo. 2011).

8

Insurance. Under Colorado law, liability insurance “protects the insured against claims brought
by third parties who have been injured by the insured’s conduct.”26 Black’s Law Dictionary
defines liability insurance as “[a]n agreement to cover a loss resulting from the insured’s liability
to a third party.” Under the unambiguous plain language of the contract, Higby was required to
purchase only commercial general liability insurance that would cover Higby and Defendants.
On its face, the CIM policy is not commercial general liability insurance, and a review of its
coverage verifies that it covers only property owned, leased, rented, or in the care, custody, and
control of the insured.27 The CIM policy is not commercial general liability insurance and so is
not an insurance policy required by the MSA. Because the CIM policy was not required by the
MSA, it was not one of the “insurance policies described above,” under MSA ¶ 9.3, and so the
subrogation requirements do not apply to the CIM policy. As a matter of law, the subrogation
requirements in the MSA do not bar Plaintiffs’ claim to recover damages for property loss as a
result of the negligence of Defendants’ employees because the CIM policy is not addressed by
the MSA.
Defendants also argue that MSA ¶ 9.2 required Higby to name DCP and National Helium
as additional assureds, such that they would be covered by the CIM policy and would not be
subject to a subrogation claims resulting from payment on that policy. This argument is correct
in that ¶ 9.2 required Higby to add DCP and National Helium as additional assureds on policies
required by the MSA. For example, Higby was required to add them on its commercial general

26

Abady v. Certain Underwriters at Lloyd’s London Subscribing to Mortgage Bankers Bond No. MBB-060009, No. 2012 WL 4829601, at *5 (Colo. App. Oct 11, 2012); Titan Indem. Co. v. Travelers Prop. Cas. Co., 181
P.3d 303, 306 (Colo. App. 2007) (observing that Commercial General Liability Insurance “protects businesses from
third-party claims for personal injury or property damage resulting from accidents”).
27

Doc. 50-3 at 3, 14.

9

liability insurance policy, which would cover Higby’s operations and would shelter DCP and
National Helium from liability resulting from Higby’s operations. But the MSA did not require
Higby to provide insurance covering damages caused by DCP or National Helium’s operations,
just Higby’s own operations. Moreover, the CIM policy was not required by the MSA, so Higby
was not required to add DCP and National Helium to that policy. Thus, Defendants’ additional
assureds argument fails.
The Court does not reach the question of whether the Colorado law forbidding
subrogation agreements like that allegedly found in the MSA, Colo. Rev. Stat. §
13-21-111.5(6)(b), because the Court has determined that the MSA does not apply to the CIM
policy.
C. Higby’s Alleged Contract Breach.
Defendants argue that Higby may have failed to purchase the Commercial General
Liability insurance required by the MSA. The Court will assume, for the sake of argument, that
this is true. Defendants go on to draw two conclusions from this allegation. First, Defendants
claim, if Higby did not obtain such insurance, it was in breach of the MSA, and thus, neither
Higby nor National Insurance can recover from DCP. But this conclusion does not follow. The
MSA lists several remedies for a material breach of the contract,28 but none of those remedies
would prevent recovery in this case. Defendants cite Richmond v. Grabowski for the proposition
that a party who breaches his contract by failing to obtain insurance and by failing to notify the
other party of such failure could not recover from the other party for fire damage caused by the

28

Doc. 40-1 at 9.

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other party,29 but that case is inapposite. In that case, the parties agreed that the damage caused
by the fire would have been covered by the insurance required by the contract. In contrast, the
Court has determined here that the damage was covered by an insurance policy not required by
the MSA, and so Plaintiffs’ alleged failure to procure the insurance required by the MSA has no
bearing on their claims in this case.
Second, Defendants suggest that the party who agrees to procure the insurance and fails
to do so assumes the position of the insurer and, thus, the risk of loss. Taking that argument as
true, Plaintiffs’ alleged failure to procure insurance still does not preclude their claims in this
case. If they assumed the position of the insurer as outlined in the MSA, they would be the
insurer only for claims covered by a commercial general liability policy, not for the claim at
issue in this case. Because the MSA does not address the CIM policy and requires only liability
insurance, it does not affect the claim in this case, and so any alleged breach of the MSA is
immaterial.
IT IS THEREFORE ORDERED BY THE COURT that Plaintiffs’ Cross Motion for
Summary Judgment (Doc. 42) is GRANTED.
IT IS FURTHER ORDERED that Defendants’ Motion for Summary Judgment (Doc.
39) is DENIED.
IT IS SO ORDERED.
Dated: November 29, 2012

29

781 P.2d 192, 194 (Colo. App. 1989).

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S/ Julie A. Robinson
JULIE A. ROBINSON
UNITED STATES DISTRICT JUDGE

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